Intermarket Chart Attack for Week of November 19, 2017

What’s next for Oil?

On November 12, I Retweeted:

Crude bullish sentiment with at 94% bulls today-the highest reading in years. The last time Crude bullish sentiment was over 90% in June 2016 it dropped 24% in a matter of months.

It must just be serendipity that WTIC almost tagged the 200D same day, which was my price target for a low-risk-entry (LRE) short, and proceeded to reverse hard.

And with that the oil and gas ETFs like XLE, OIH, XLE, XES all started to roll over, then pick up speed, with the XOM sell-off the likely overreaction to Norway’s news they were selling 1/5 of their oil and gas holdings, notably XOM.

With that, I don’t think the selling is done.

Volatility Foreboding

I have written about my Stock-Bond-Volatility ratio triggering the start of a pullback. It triggers rarely so I take it seriously. I even tweeted Nov 2 that we were 3 trading days away from the start of a market pullback. On Tues Nov 7th, the market pulled back, especially in select assets: Japanese stocks, Junk Bonds, Oil. I don’t make the weather, I just report it!

In addition to my volatility analysis, the VXX daily chart is setting up very much like an inverse head&shoulder pattern which signals higher. The size of VIX call buying is outsized as is the jump in VVIX. Put it together, and I think we we may experience more Forced Selling into year end, especially if Tax Reform doesn’t pass.

Dollar Done Bouncing?

Back on September 12, I suggested the 12% drop in the US Dollar would likely pause and bounce. It did and has been working up to that 200D price target around $96 when it got interrupted from oil falling with US junk bonds. Now, I think it resumes its counter-trend rally, especially if there is talk of Repatriation of corporate earnings. I provide several views to show short-term to longer-term horizons.

Yen is a Crowded Short

JPY/USD is now an extremely crowded short. Specs haven’t been this bearish since late 2015, pre-20% rally. With that, the FXY ETF looks headed to the 200D even though I fear range-bound until we have a bigger catalyst to sell Japanese stocks.

For the intermediate term, we are trading this channel:

Higher Rates, Really?

Most expect rates to move higher starting in December, and short-term there is support at the convergence of the 50+200D for the 10-year Treasury Yield, but I contend the Fed might surprise in Dec and not raise. Not only do I suspect markets may pullback by the FOMC date, with their inflation metric unmet, but with their Balance Sheet rebalancing, they are in essence passing on the equivalent of rate rises without having to actually raise them.

 Fed plan to shrink balance sheet by $450 billion through end-2018 “roughly equivalent” to full point rate hike via

The Big Tell for me is Commodities. They tend to lead rates, not the other way around. And right now they (Oil, Ags, Copper, Steel, etc) look lower.

No Inflation Spike, Yet

No Value Rotation, Yet

SPY Looks Tired

Lack of buyers in HYG was The Tell that the weight of the market could cause it to fall. Big money managers seemingly want SPY to fall!

Transportation is Weak

Small Caps Vulnerable

Gold Miners Near Support

Gold is Trying

US Treasuries Found Support

TLT looks ready to move higher, soon, and with potential velocity.

At LaDucTrading, I analyze price patterns and intermarket relationships across stocks, commodities, currencies and interest rates. I develop macro investment themes to identify tactical trading opportunities and employ strategic technical analysis to deliver high conviction stock, sector and market calls. My annotated Charts are meant to do most of the talking and illustrate my Thesis, Trigger, Time Frames, Trade Set-ups and Option Tactics. When applicable, I note Unusual Option Activity (UOA) and Deal Flow. I also keep a Tally and follow a Trade Plan, both of which are made available to members. No proprietary indicators are used, just solid chart pattern recognition, volatility insight and some big-picture perspective thrown in.

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